Domestic Taxes

Social spending bill could cut taxes for most millionaires: analysis

Democrats’ $1.75 trillion social spending package could cut taxes for most millionaires, according to an analysis from the Tax Policy Center released Thursday.

The analysis found that the package, called the Build Back Better plan, would give more than 65 percent of Americans making at least $1 million per year an average tax cut of $16,760.  

The other 34 percent of those in that income range would see their taxes increased by an average of more than $228,300, however, meaning that, overall, those earning $1 million or more would on average see their taxes raise by around $68,000.

The tax cut comes because Democrats are proposing to lift an annual cap on the state and local tax (SALT) deduction.

The current version of the bill in the House proposes to raise the cap from $10,000 to $80,000, holding it there through 2030. The cap would then revert back to $10,000 in 2031.

The current SALT tax, which Republicans passed in 2017, is set to expire in 2025.

Democrats have been at odds over how to address the SALT tax. House Democrats have expressed a desire to raise the level of the cap, while some senators in the party would prefer exempting taxpayers under a certain income level.

Raising the cap would have nearly no benefit for middle-income households, the analysis noted, with the Tax Policy Center adding that doing so would reduce their taxes by an average of just $20.

Meanwhile, those making between $370,000 and $870,000 — who fall in the top 5 percent, but not top 1 percent, of earners — would see their after-tax income increase by 1.2 percent under the new plan.

Overall, the institute said that the latest version of the Build Back Better plan would cut taxes on average for nearly all income groups next year — save for that 34 percent of Americans earning $1 million or more.

Tags SALT tax social spending bill Tax rates

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